Will the Chinese Rich Have a Hard Landing?

By Robert Frank

The biggest winners in the world’s most winning economy are losing confidence.

Associated Press

According to a survey from Allianz China Life Insurance, the Chinese wealthy are putting more money into cash and less into stock, real-estate and other investments.

“Compared to three years ago, the rich people care more about the safety of their wealth than the returns,” said Liu Jian, the survey’s chief researcher.

They still have big exposure to risk – especially to real-estate. The survey, which polled individuals with more than $78,520 and $157,000 in investments (which apparently counts as “rich” in China for survey purposes) , said that property makes up 75% of the respondents’ assets.

The survey bolsters recent evidence that the froth may be settling on the Chinese luxury and auction markets. A recent Christie’s auction of Chinese contemporary art came up far short of expectations, with six of the 14 lots failed to sell for the minimums and four sold below their low estimate.

“I did really expect it to go better,” Christie’s wine sales chief, Charles Curtis told Reuters. “I knew that Lafite was soft and that it had struggled in my competitor’s auctions in recent months but I didn’t realize the depth of the problem.”

The depth of the problem is indeed the problem. The Chinese rich have been supporting markets for everything from Bordeauxs to Birkin bags and Gulfstreams, making up for slack demand in the U.S. and Europe. If the Chinese economy has a hard landing, the newly rich are sure to take a hit.

If they lose their consuming confidence, the business of selling to the global rich will become a lot tougher.

Comments (4 of 4)

miya ã‚ˆã‚Š:Hi RyuVery good to hear from you. How's life in Boston?Actually there are lot's of Condos there which were converted in to luxaury cond's from hotels before they were started their construction.I don't know the exact reson why, but anyway I saw some of them such us Jean Nouvel's and HdeM's around Soho. They are now under consrtuction. You will see Nouvel's has almost done the exterior, but the latter has just exposed its concrete structure so far.Of course their rents are surprising. While the new upper class are living in Brooklyn such as along L-line rising up the average incomes and rents of the areas, the luxury Manhattan areas such as around Soho are boosting up its prestigious states by rebuilding brand new buildings.What's also amazing is Prada in Soho designed by OMA has been rearranged the interior. Its first floor was originally designed as only a kind of show window'/ void space, and the basement was for retail for men/women. But now the first floor is just a men's floor and the basement floor is for women. The charming cabinet designed by SANAA seemed in no use. It seems the fundamental idea well-organized Programing space' has totally gone. It is sadly just a commercial space like others swallowed into Sohoism'.

11:46 pm December 8, 2011

Peter Bradshaw wrote :

The music will soon stop and the chairs are less than the players, lots of folk will be left standing.

6:02 pm December 8, 2011

Rob Valerio wrote :

I totally agree that the rich Chinese have a much better memory of hard times and will be much more astute at keeping their money, even at low or no returns. All the multi-millionaire Chinese factory owners I know came from humble beginnings and they all understand the risks involved in Chinese real estate and stock market. Most consider both to be a form of gambling, so limit their exposure to what they feel comfortable losing.

Americans could do well learning from the Chinese when it comes to money risk management!

4:22 pm December 8, 2011

elsa wrote :

The Chinese although may have adopted our spending habits in recent years are still Chinese at heart so when face with pending decrease in income, they went back and remembered their parents' advise to save your money.

About The Wealth Report

The Wealth Report is a daily blog focused on the culture and economy of the wealthy. It is written by Robert Frank, a senior writer for the Wall Street Journal and author of the newly released book “THE HIGH-BETA RICH.”